Dealer Lab: June earnings up 69 percent

Publish Date:

Aug 22, 2013

By Joe Delmont

DESPITE SOME foul weather in Florida during the second quarter, Destination Powersports of Punta Gorda, Fla., posted another strong month in June and rang up some impressive gains during the first half of 2013 compared to the same time last year.

In June, the dealership reported a net income of $28,344 on total revenue of $444,120, compared to earnings of $16,729 on sales of $531,934 during June 2012. That’s a 69.4 percent gain in net income despite a 16.5 percent drop in total revenue. (Click image for larger view.)

Interestingly, cost of sales dropped from $411,730 last year to only $307,913 this year, a decline of $103,817, or 25.2 percent. That yielded a gross profit of $136,207, up from $120,204 in 2012.

The decline in unit sales and parts is not seen as a serious problem. “I look at what we sold and if we got more gross on those sales,” says owner Bill Shenk.

“A couple of things happened,” he continues. “New units are the lowest margin item we sell with the highest carrying costs and highest interest expense by far, as a percent of gross profit created.

“On the other hand, service labor is our highest percent gross followed by parts and accessories. New motorcycle sales were down (our worst gross percentage), used were up (our best vehicle gross profit percentage), parts gross was up and service gross was up (our best percentage of revenue and our best floor-traffic builder of qualified buyers).”

Inventories were leaner in June. This year, the dealership had 238 new and used units on hand, down from 311 units in June 2012. Inventory of units this year was valued at $2.2 million, down from $2.97 million last year.

All of the reduction in inventory is in new units — mostly personal watercraft and boats. “We still have way too much new based on our sell-through,” Shenk says. “It is a tough balance in a small marketplace, between representing the OEM’s full line and making a profit.

“By any other industry standard, 180 days’ average age of inventory is totally unacceptable if you intend to show a profit. Our target is 180 days aging, and we are currently way too high at 240 days.” (Continued)